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tv   Nightly Business Report  PBS  March 18, 2014 1:00am-1:31am PDT

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. this is "nightly business report" with tyler mathisen and susie gharib brought to you in part by. >> featuring stephanie link who shares her investment strategies stock picks with action alert plus. the portfolio she manages with jim cramer. you can learn more >> bullish response, with the dow snapping a five-day losing streak to post the biggest gain in two weeks but how long will the rallies last? >> big decision. janet yellen will lead the policy meeting as head of the federal research this week and she may be ready to changes. >> and marry barra makes a public admission about recalls
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and plans to change the way the company handles investigations but was she persuasive? that and more for night by business report for monday, march 17th. >> good evening, everyone. it is st. patrick's day, a lot of green and green arrows. a relief rally thanks to no violence following the referendum vote in crimea. more on that in a moment. now a report showing manufacturing output jumped the post in six months, also added to the positive feeling. on wall street, the dow surged 181 points, the nasdaq rose 34 and the s&p 500 up almost 18 points. all three had the biggest one-day gain in two weeks. >> as the markets rose because of the lack of violence, tensions between the united states and russia are rising. some call it the worst super power dispute since the cold war. the u.s. and european union slapped sanctions on russia and
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ukrainian officials after a vote paved the way for russian president vladimir putin to annex crimea from ukraine. the economic sanctions are the most visible signs of western anger at russia. still, president obama says a diplomatic solution can be reached before the tensions escalate further. >> i believe there is still a path to resolve this situation diplomatically in a way that addresses the interests of both russia and ukraine. that includes russia pulling its forces in crimea back to their basis, supporting the deployment of additional international hon monitors in ukraine and engaging in dialogue. >> steve has a look at what may happen next. >> reporter: here in the ukraine on monday, everyone digesting the vote to join the russian federation from the crimea people. everybody turning to president
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putin to see what he does next. does he and his russian parliament give annexation the okay? two, does he increase the pressure on ukraine and three, how does he react to actions from the u and west. they are adamant that the referendum is illegal. i spoke today to the prime minister who said to me, he still wanted a diplomatic solution rather than a military solution to the crisis, although, he and every ukrainian must be prepared to fight for their country, if indeed, there is an escalation of russian intent in the east of this country. this is steve sedgwick. another market mover could be chair janet yellen's first news conference. she'll answer questions on wednesday as head of the central bank. it's widely expected she will continue reducing the fed's stimulus measures but what is
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not certain, what she will say on key targets about employment and inflation and whether she's ready to make big changes. steve liesman has more. >> reporter: janet yellen holds the first press conference having promised continuity with ben bernanke. she'll have to make changes and make them as soon as this meeting. here is why. in 2012 with her leading the central bank, the fed promised not to consider raising interest rates until the unemployment rate fell to 6.5%. seems like a safe way back then. unemployment at 7.9% and steading. second, it wasn't clear that it fell for the right reasons. many, in fact, were dropping out of the work force. >> the unemployment rate is not a sufficient statistic to measure the health of the labor market.
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in additional 5% in unusually high fractions of the labor force is working part time for economic reasons. >> reporter: the numbers are staggering. 7.2 million americans are working part time because they can't find full-time work. 10.4 million americans are unemploymented. 3.8 have been employed for more than six months. some retired and became so discouraged they dropped out of the work force. the big question is this, how many more workers and working hours are out there? if we're near full employment, workers can demand higher rages and higher inflation. >> there is work that suggests long-term unemployment met the unique feature of this expansion at record levels. they have little or no effect on inflation. the only effect on inflation is from the short-term unemployed and back to normal levels. >> reporter: if that's the case, yellen could break on a much more fundamental issue, raising
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rates much sooner than markets think. for the moment, yellen is convinced there is lots of slack in the labor market. look for her to find a way to communicate the slack in the markets for the days ahead. i'm steve liesman. our guest tonight says the stock market is quote pricey and tells investors to prepare for a correction. chief investment strategist. ms. gibbs, welcome. we could see 10%. what should i do to prepare for that? >> the issue we have now is the stocks are really priced for perfection. right now the s&p 500 is trading at 15.6 times forward earnings. you're paying $15.66 for every dollar a company is forecasted to earn. since the financial crisis, normally you would pay $14. it's going back further, 15
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years you would pay around $16. it's not that we're a bubble or that we're way above the historical range, but we're at the top of that range. >> what should i do, erin? should i get out of stocks? should i lightening up on certain kinds of stocks? ? >> no, not saying sell, use any corrections as opportunities in get in. right now it's extremely hard to find good values. we're sort of at the top of the historical range. in good economies, you can go much more expensive, but use any pull backs, any disappointing news as opportunities to get into more equities. we still expect another 10% for the year. >> right this is certainly a headline driven market. we saw the worries about the ukraine, today, relief rally because of developments in the ukraine. now we have the fed, you heard steve liesman's report. what's the most important decision that could come out of the fed this week from janet
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yellen that could impact the markets, and what do you think the market reaction will be? >> for us, it's all about whether she's going to raise the rates or go further into language saying she's not just looking at unemployment. that could really affect the market this week. if she raises rates, which is not wall street is expecting, you can see a much bigger correction. ultimately, i feel she's not going to raise rates. we're not going to look at any raising rates until at least the second half of the year or 2015, but we're looking for indication of language that it's not on the table right now. >> in the short term, erin, what is the biggest risk to the u.s. market? china, the ukraine, the underlying growth or lack of growth in the u.s. economy and corporate profits? >> for us, it's more about the u.s. economy. right now, think of it as we're firing on all four cylinders but driving a chevy, not a ferrara.
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we want to see the fundamentals come through and the corporations start earning what we expected at the beginning of the year. >> well, i'm with that because earnings are coming out in the next few weeks. at the end of the day, when the numbers are finally out for the first quarter of 2014, is it going to be positive numbers for the markets or negative? >> so, we've seen a lot of revisions downwards, and that's where i'm really concerned about potentially having a correction. estimate haves come down from about looking for about 10% profit growth for this year to a little about 7.5% growth this year. pretty big revision in two months. now a lot of it has been warnings about the weather has really hurt our profits and our revenues for first quarter, but that only takes you so far. also, a lot of corporations are saying they are going to make up for it in the second half of the year. we really want to see companies able to beat expectations as
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they did no 2013, and are we still going to be able to meet those gross expectations. >> erin, nice to be with you this evening. thanks for joining us. >> thank you. >> chief investment strategist. watching china's currency. the people's bank of china is allowing the currency to trade against the u.s. dollar. most are free-floating. it may sound like a small move, but it's a big step towards a market-based economy and as sarah eisen tells us, it could benefit big companies. >> reporter: china wants a world-class economy, but they need a world-close currency. china took a bigger step towards the goal this weekend letting the uyon float. the chinese economy is not
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slowing down and encourage investments. >> in the long run, i think it should make chinese assets more inextensive which could attract more investments but they have to get over slower growth and the risk of default. >> reporter: it may help the chinese economy. they long held the chinese government kept the value low on purpose making experts cheaper. the currency has a powerful upside for the global economy because the chinese consumer will have more spending power. american companies that stand to gain from consumer spend income china are yum brand, mcdonalds and proctor and gamble. even if it means more ups and downs for them. >> when a country is making a fundamental shift in the composition of its economy, away from investment-driven and export driven and into domestic
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consumption driven, that's bound to have bumps and pitfalls. >> some say that will make the number two economy look worse than it actually is, but for now, there is plenty of praise for china for opening up to the global economy at a time when other emerging powers, russia for one are pulling back. for "nightly business report," i'm sarah eisen. still ahead, g m's new ceo makes a public appearance and commits to resolving safety issues at the auto maker, but was it enough? more americans are out there
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looking for work and many are finding it more quickly. unemployment fell in 4 3 states in january, rose slightly in one one, iowa and remained unchanged in sixth. north dakota with the oil boom has the lowest jobless rate and iowa with sluggish manufacturing has the highest rate in the country, 9.2%. three new recalls for general motors. the auto maker adding 1.5 million cars to the list of vehicles that need to be fixed. recalls that are unrelated to the faulty ignition switches they have been reporting on recently and mary barra addressed how she planned to change the way the company handles defect investigation. phil lebeau has been covering this story for us and joins us now. this is the first time we're hearing from mary barra, why did she do this and how effective do you think she was in this public statement? >> you know, suzy, i think she
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was fairly effective. i wouldn't call this a home run but certainly had to do something and it was effective from the stand point they are trying to get in front of the story instead of reacting several hours, maybe a couple days after revelations come out. general motors put out these three recalls and mary barra was fairly forthright saying this is the beginning of more revelations. >> i want you to know that we're completely focused on the problem at the highest levels of the company and putting the customer first and that is guiding every decision we make. >> that's just one of the comments we heard from mary bar barra. this was an internal message sent to the employees but posted on the website. it was also meant for outside consumption. a good first step, not a home run but important step to make the public aware they realize the severity of the situation. >> as you pointed out, phil, three more gm recalls. is this a case of dumping bad
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news out at one home to get ahead of it and secondly, does ms. bar ra need to face the press? >> yes, this is a case of dumping the news, being as transparent as possible. i looked at the three recalls that cover 1.5 million vehicles. we're not going to get into all of this. in terms of recall notices, these are not the most earth-shatteri earth-shattering. there is no injuries or deaths involved and one was brought to the gm recall committee less than a week ago. that tells you how quickly they want to be protective in saying anything that smells close to being a recall, get it out. we don't want to appear to hold back any information at all. >> you know what's amazing, they have four invest gangss going on at once. how long is this going to drag on? sounds like she's going to be in crisis mode for a while. >> four investigations, two congressional hearings within the last month.
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it will continue for awhile. this was about trying to get in front of the story. >> phil lebeau reporting from chicago. speaking of recalls, honda recalling 900,000 of the popular odyssey mini fans, 2005 to 2015. a fuel pump cover can crack over time increasing the risk of fire. the problem will be fixed over the summer once honda dealers have the new part they need. honda is not aware of crashes, injuries or fires related to the problem. a 10 billion-dollar telecom deal is where we begin tonight. vote a phone is buying the largest cable operator, ono as it tries to expand to europe. this helps the company increase the broad band offerings and vodafone will gain insane. shares up on news that it's
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cholesterol drug met goals. the treatment significantly cut bad lvl cholesterol levels among patients. the stock rose 1% to $123.86. under armor shares jumped on news the board approved the stock split, the second since the athletic gear maker went public back in 2005. the retailer ceo believes the move might broaden the stock investor space and that's true today. it rose 2% to $119.67. >> shares of sears higher on the news. the casual clothing retailer will begin trading on the nasdaq in april under the ticker symbol le. the stock rose almost 2%. sears said that is to $44.87. shares plunge on concerns the business may be hurt by a u.s. government plan to give up oversight of the internets domain naming system. because of that, they cut to
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market perform from outsiding worries veri sign won't and dot net contracts. it is to $51.68. twitter's ceo is planning a personal trip to shanghai. his first ever to china where he'll meet with government officials. the company declined to comment what will be discussed. twitter has been blocked by chinese sensors since 2009. shares were up a fraction today to $52.05. >> another chinese company to tell you about. alibabba. the chinese e come morse is one of the biggest internet players and plans to go public here in the u.s. in what could be the biggest initial public offering since facebook. so what exactly does alibaba do? and why are so many investors excited about it? josh lipton explains.
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>> reporter: it's an ipo sparking a ton of buzz. alibaba started the process of filing for a u.s. ipo and months of speculation about where it would go public. the chinese e commerce giant runs websites where consumers and companies buy goods. alibaba makes money for advertising. now the company will make a public debut possibly one day bringing the business state side and competing with well-known e commerce giants. >> going public on the new york stock exchange will be a great event for them. that could really help them be a very, very important force in the u.s. and in europe, as well, competing with amazon and ebay. >> reporter: alibaba generated revenue of 2.3 billion in 2011 which doubled in 2012 and most recent quarter revenue surged more than 50% year over year.
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alibaba is profiting from a fast-growing chinese e commerce market the company dominates. raymond james peg the evaluation at $150 billion. that's especially good news for yahoo which holds a 24% stake in alibaba. after taxes analysts say that stake could be worth $25 billion. yahoo stock soared nearly 80%. investors are excited about the alibabaipo and piling into yahoo to get a piece of the action. after that, analysts say there will be pressure on yahoo's ceo marissa mayer. >> assuming alibaba goes public in the third quarter, by the end of the year they need to show a clear path to, you know, growth again and i'm talking about the yahoo operations not some of the parts if the market is to
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embrace the yahoo stock, and continue to buy it. >> reporter: no ipo since facebook has created the kind of attention that alibaba is generating. investors, bankers and analysts are anxiously awaiting more details about its business. one thing is certain, the future of e commerce, chinese ipos and yahoo will look different after alibaba's public debut. josh lipton, "nightly business report", silicon valley. and coming up on the program, what the golf industry is doing to get back in the swing of things and prevent the cold, hash winter from taking a bigger toll on business.
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28 attorneys general are asking retailers to follow the lead of cvs and stop selling tobacco products. the officials sent letters to five of the country's biggest retailers that have pharmacy warning selling tobacco products undermines smoking campaigns. so far, none of the companies, walmart, walgreens, safe way, kroger, announced plans to follow cvss example. u.s. home builders are slightly more confident ahead of the spring selling season. a closely watched sentiment index rose thanks to a boost of new home sales in january to the fastest rate in more than five years, but builders are still concerned about a shortage of skill workers ready to build land and rising costs for materia materials. >> senate lawmakers released their draft for fannie mae and dre freddie mac. they would be replaced by the federal mortgage insurance
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corporation. it would provide homeowners assistance only after private creditors take the first 10% loss. this new added entity would be financed with fees on lenders who want the government backstop. and finally, the official start of spring is this thursday, but winter is not done yet. a storm blanketed the mid atlantic region today, dumping several inches of snow in the washington dc area forcing federal offices to close while ski resorts have benefitted from the long, hash winter, the opposite is true for many golf courses. dominic chu is looking how the golf industry is taking a swing at spring. >> reporter: the harsh winter has taken a toll on the game of golf. according to the national golf foundation, golf courses across the country lose an estimated $50 million for each day that they remain closed for things like weather. that's a real impact on a lot of
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local economies, the golfing industries is looking to fight back. golf equipment makers are setting up these urban driving range venues to drum up interest in the game, and there is a good reason why. the golf equipment and apparel business is a 5 billion-dollar a year industry and they want golfers to think less about winter and a little more about spring. celebrity golf instructor and tiger woods coach is eager to get golfers back into the swing of things. >> i live in texas, so it's not too bad. here in the northeast it's not been too good. so it slows down the season. one of our goals with taylor made is to hopefully kick start the season. >> reporter: equipment and gear makers like taylor made, calloway and others are hoping the weather doesn't put a serious damper on sales. there is a reason why the first part of the year is critical. manufacturers want theirs in the hands of golfers early so they are chomping at the bit to use
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them when it gets warmer. the worry is a longer winter will cause people to postpone purchases for a couple months or worse, postpone them until next year or indefinitely. >> when you extend the winter by a month, you reduce the sales almost by a month in the united states. not exactly a ratio of 1-1 but in the toughest part of country when it's the coldest, that's what you find. >> reporter: now, the cold winter will e actually end, but will the golf company save par or will 2014 land it in the rough? for "nightly business report", i'm dominic chu. >> from the greens to the day for the wearing of the green, eight out of ten americans are doing just that as they celebrate st. patrick's day. the national retail federation says that translates into 133 million people who will feel irish for today. the average american expected to spend $35 on today'sfestivities
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and that is a lot of green. >> a lot of parades today. >> a lot of parades today. your green tie, in the spirit. happy st. pats day, everybody. i'm zj zsusie gharib thanks for watching. >> i'm tyler mathisen. see you back here tomorrow night. "nightly business report" has been brought to you in part by. >> founded by jim cramer, is an independent source for stock market analysis. cramer's action alert plus is home to his multi million dollar portfolio. you can learn more uncer:
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